U.S. Bureau of Labor Statistics

Productivity and Costs News Release

Transmission of material in this release is embargoed until USDL-09-1330
8:30 a.m. (EST) Thursday, November 5, 2009
Technical information: (202) 691-5606  dprweb@bls.gov  www.bls.gov/lpc
Media contact: (202) 691-5902  PressOffice@bls.gov
PRODUCTIVITY AND COSTS
Third Quarter 2009, Preliminary
Nonfarm business sector labor productivity increased at a 9.5 percent
annual rate during the third quarter of 2009, the U.S. Bureau of Labor
Statistics reported today. This was the largest gain in productivity since
the third quarter of 2003, when it rose 9.7 percent. Labor productivity,
or output per hour, is calculated by dividing an index of real output by
an index of hours of all persons, including employees, proprietors, and
unpaid family workers. Output increased 4.0 percent and hours worked
decreased 5.0 percent in the third quarter of 2009 (All quarterly percent
changes in this release are seasonally adjusted annual rates).
From the third quarter of 2008 to the third quarter of 2009, nonfarm
business output fell 3.5 percent and hours worked fell faster, 7.5
percent, resulting in a productivity increase of 4.3 percent (tables A and 2).
The four-quarter decline in hours was the largest in the series, which
begins in 1948. Nonfarm business productivity rose 1.8 percent in 2008,
and 2.6 percent per year on average during the 2001-2007 period
corresponding to the last complete business cycle.
Unit labor costs in nonfarm businesses fell 5.2 percent in the third
quarter of 2009; the increase in productivity outpaced the increase in
hourly compensation. Unit labor costs declined 3.6 percent over the last
four quarters--the largest decrease since the series began in 1948 (tables A
and 2). BLS defines unit labor costs as the ratio of hourly
compensation to labor productivity; increases in hourly compensation tend
to increase unit labor costs and increases in output per hour tend to
reduce them.
Productivity increased 9.8 percent in the business sector in the third
quarter of 2009. This was the largest increase in the series since the
second quarter of 1972. Unit labor costs decreased 5.1 percent during the
third quarter of 2009 (tables A and 1).
Manufacturing sector productivity grew 13.6 percent in the third quarter
of 2009, as output increased 7.7 percent despite a 5.2 percent decrease in
hours worked. This was the largest increase in the quarterly productivity
series, which begins in 1987. Over the last four quarters, manufacturing
productivity increased 3.1 percent as output and hours declined 10.8
percent and 13.5 percent respectively (tables A and 3). Manufacturing
sector productivity increased 0.8 percent in 2008, and at an average annual
rate of 4.0 percent from 2001 to 2007.
In the third quarter of 2009, changes in productivity, output, and hours
were larger in durable goods producing industries than in nondurable goods
industries (tables A, 4 and 5).
Manufacturing unit labor costs fell at a 7.1 percent annual rate in the
third quarter of 2009, but increased 2.3 percent over the last four
quarters (tables A and 3).
The data sources and methods used in the preparation of the manufacturing
output series differ from those used in preparing the business and nonfarm
business output series, and these measures are not directly comparable.
See Technical Notes for further information on data sources.
Revised measures
In the second quarter of 2009, nonfarm business productivity growth was
revised up to 6.9 percent, reflecting declines in output and hours of 1.1
percent and 7.5 percent, respectively. Unit labor costs were revised down
due to the upward revision in productivity. In the manufacturing sector,
revised second quarter productivity growth was 6.8 percent, a 1.9
percentage point upward revision. Manufacturing unit labor costs declined
1.6 percent, rather than rising 0.2 percent as reported September 2.
In the nonfinancial corporate sector, revised data for the second quarter
of 2009 show that productivity increased 6.6 percent, as output per hour
was revised up along with output; hours were unrevised. After revision,
unit labor costs fell 4.5 percent in the second quarter, but rose 1.4
percent from the second quarter of 2008 to the second quarter of 2009.
Unit profits grew at a 23.0 percent annual rate in the second quarter of
2009.
______________
The revised Productivity and Costs press release for third-quarter 2009 is
scheduled to be released on Thursday, December 3, 2009 at 8:30 a.m. (EST)
======================================================================================================
Table A. Preliminary third-quarter 2009 measures, percent change from previous quarter, annual rate
(Q to Q) and from same quarter a year ago (Y to Y)
Sector Nonfarm Durable Nondurable
Business Business Manufacturing Manufacturing Manufacturing
Q to Q Y to Y Q to Q Y to Y Q to Q Y to Y Q to Q Y to Y Q to Q Y to Y
------------------------------------------------------------------------------------------------------
Productivity 9.5 4.3 9.8 4.3 13.6 3.1 21.2 -0.9 5.5 4.7
Output 4.0 -3.5 4.1 -3.3 7.7 -10.8 12.4 -16.9 3.4 -4.6
Hours -5.0 -7.5 -5.1 -7.4 -5.2 -13.5 -7.2 -16.1 -2.0 -8.9
Hourly
compensation 3.8 0.5 4.2 0.5 5.5 5.5 6.0 6.2 5.2 4.8
Real hourly
compensation 0.2 2.1 0.5 2.1 1.9 7.1 2.3 7.9 1.6 6.4
Unit labor
costs -5.2 -3.6 -5.1 -3.7 -7.1 2.3 -12.5 7.2 -0.3 0.1
======================================================================================================
Table B. Revised and previous measures for: second quarter 2009
Sector Nonfarm Durable Nondurable
Business Business Manufacturing Manufacturing Manufacturing
Revised Previous Revised Previous Revised Previous Revised Previous Revised Previous
------------------------------------------------------------------------------------------------------
Percent change, annual rate
Productivity 6.9 6.6 6.8 6.5 6.8 4.9 3.7 3.1 5.2 2.2
Output -1.1 -1.5 -1.0 -1.4 -8.1 -9.8 -15.9 -16.4 -0.2 -3.2
Hours -7.5 -7.6 -7.4 -7.5 -13.9 -14.0 -18.9 -18.9 -5.1 -5.3
Hourly
compensation 0.3 0.3 0.2 0.2 5.1 5.1 7.9 7.9 1.3 1.5
Real hourly
compensation -1.0 -1.0 -1.1 -1.2 3.7 3.7 6.5 6.5 0.0 0.2
Unit labor
costs -6.1 -5.9 -6.2 -6.0 -1.6 0.2 4.1 4.6 -3.7 -0.7
======================================================================================================
Table C. Nonfinancial corporations: revised second quarter 2009 productivity and cost measures
Real
Hourly hourly Unit Implicit
Produc- compen- compen- labor Unit price
tivity Output Hours sation sation costs profits deflator
------------------------------------------------------------------------------------------------------
Percent change, annual rate
Revised 6.6 -2.2 -8.3 1.8 0.5 -4.5 23.0 -1.3
Previous 6.2 -2.6 -8.3 1.8 0.4 -4.2 22.5 -1.1
======================================================================================================

TECHNICAL NOTES
Labor Hours: Hours data for the labor productivity and cost measures
include hours for all persons working in the sectorwage and salary
workers, the self-employed and unpaid family workers. The primary source
of hours and employment data is the BLS Current Employment Statistics
(CES) program, which provides monthly survey data on the number of jobs
held by wage and salary workers in nonfarm establishments. The CES also
provides average weekly paid hours of production and nonsupervisory
workers in these establishments. Weekly paid hours are adjusted to hours
at work using data from the National Compensation Survey (NCS). The BLS
Hours at Work survey, conducted for this purpose, was used for earlier
years. The Office of Productivity and Technology estimates average weekly
hours at work for nonproduction and supervisory workers using information
from the Current Population Survey (CPS), the CES, and the NCS.
Data from the CPS are used for farm labor, nonfarm proprietors, and
nonfarm unpaid family workers. Estimates of labor input for government
enterprises are derived from the CPS, the CES, and the National Income and
Product Accounts (NIPA) prepared by the Bureau of Economic Analysis (BEA)
of the Department of Commerce.
The CES measures jobs, counting a person who is employed by two or
more establishments at each place of employment. In contrast, the CPS
features measures of employment that count each person only once and
classify each person according to his or her primary job; hours worked at
all jobs by that person accrue to his or her primary job. However, the
CPS also collects more detailed information on employment and hours worked
at primary jobs and all other jobs, separately. The BLS productivity
measures use the more detailed information on employment and hours to
assign all hours worked to the correct industrial sector and avoid
duplicating hours data from the CES.
Output: Business sector output is a chain-type, current-weighted index
constructed after excluding from gross domestic product (GDP) the
following outputs: general government, nonprofit institutions, and private
households (including owner-occupied housing). Corresponding exclusions
also are made in labor inputs. Business output accounted for about 77
percent of the value of GDP in 2005. Nonfarm business, which excludes
farming, accounted for about 76 percent of GDP in 2005.
Annual indexes for manufacturing and its durable and nondurable goods
components are constructed by deflating current-dollar industry value of
production data from the U.S. Bureau of the Census with deflators from the
BLS. These deflators are based on data from the BLS producer price
program and other sources. The industry shipments are aggregated using
annual weights, and intrasector transactions are removed. Quarterly
manufacturing output measures are based on the index of industrial
production prepared monthly by the Board of Governors of the Federal
Reserve System, adjusted to be consistent with annual indexes of
manufacturing sector output prepared by BLS. Durables include the
following 3-digit NAICS industries: wood product manufacturing;
nonmetallic mineral product manufacturing; primary metal manufacturing;
fabricated metal product manufacturing; machinery manufacturing; computer
and electronic product manufacturing; electrical equipment and appliance
manufacturing; transportation equipment manufacturing; furniture and
related product manufacturing; and miscellaneous manufacturing.
Nondurables include: food manufacturing; beverage and tobacco product
manufacturing; textile mills; textile product mills; apparel
manufacturing; leather and allied product manufacturing; paper
manufacturing; printing and related support activities; petroleum and coal
products manufacturing; chemical manufacturing; and plastics and rubber
products manufacturing.
Nonfinancial corporate output is a chain-type, current-weighted index
calculated on the basis of the costs incurred and the incomes earned from
production. The output measure excludes the following outputs from GDP:
general government; nonprofit institutions; private households;
unincorporated business; and those corporations classified as offices of
bank holding companies, offices of other holding companies, or offices in
the finance and insurance sector. Nonfinancial corporations accounted for
about 50 percent of the value of GDP in 2005.
Productivity: These productivity measures describe the relationship
between real output and the labor time involved in its production. They
show the changes from period to period in the amount of goods and services
produced per hour. Although these measures relate output to hours at work
of all persons engaged in a sector, they do not measure the specific
contribution of labor, capital, or any other factor of production. Rather,
they reflect the joint effects of many influences, including changes in
technology; capital investment; level of output; utilization of capacity,
energy, and materials; the organization of production; managerial skill;
and the characteristics and effort of the work force.
Labor Compensation: Estimates of labor compensation by major sector,
required for measures of hourly compensation and unit labor costs, are
based primarily on employee compensation data from the NIPA, prepared by
the BEA. The compensation of employees in general government, nonprofit
institutions and private households are subtracted from compensation of
domestic employees to derive employee compensation for the business
sector. The labor compensation of proprietors cannot be explicitly
identified and must be estimated. This is done by assuming that
proprietors have the same hourly compensation as employees in the same
sector. The quarterly labor productivity and cost measures do not contain
estimates of compensation for unpaid family workers.
Unit Labor Costs: The measures of unit labor costs in this release
describe the relationship between compensation per hour and productivity,
or real output per hour, and can be used as an indicator of inflationary
pressure on producers. Increases in hourly compensation increase unit
labor costs; labor productivity increases offset compensation increases
and lower unit labor costs.
Presentation of the data: The quarterly data in this release are
presented in three ways; as index number series where 1992=100, as percent
changes from the corresponding quarter of the previous year, and as
percent changes from the previous quarter presented at a compound annual
rate. Annual data are presented both as index number series and percent
changes from the previous year.
The index numbers and rates of change reported in the productivity
and costs news release are rounded to one decimal place. All percent
changes in this release and on the BLS web site are calculated using index
numbers to three decimal places. These index numbers are available at the
BLS web site, http://www.bls.gov/data/home.htm, or by contacting the BLS
Division of Major Sector Productivity. (Telephone 202-691-5606 or email
DPRWEB@BLS.GOV)
Information in this release will be made available to sensory-
impaired individuals upon request. Voice phone: 202-691-5606; Federal
Relay Service number: 1-800-877-8339.

SOURCES: Output data are from the Bureau of Economic Analysis and the
Census Bureau of the U.S. Department of Commerce; the Bureau of Labor
Statistics, U.S. Department of Labor; and the Federal Reserve Board.
Compensation and hours data are from the Bureau of Labor Statistics and
the Bureau of Economic Analysis.
RELIABILITY: Productivity and cost measures are regularly revised as
more complete information becomes available. The measures are first
published within 40 days of the close of the reference period; revisions
appear 30 days later, and second revisions after an additional 60 days.
In the business sector, the third publication (second revision) of a
quarterly index of output per hour of all persons has differed from the
initial value by between -1.5 and +1.4 index points approximately 95
percent of the time. This interval is based on the performance of this
measure between the fourth quarter of 1995 and the second quarter of
2009.
Footnotes, Tables 1-6
(1) Wages and salaries of employees plus employers' contributions for
social insurance and private benefit plans. Except for nonfinancial
corporations, where there are no self-employed, data also include an
estimate of wages, salaries, and supplemental payments for the self-
employed.
(2) The change for recent quarters is based on the Consumer Price Index
for all urban consumers (CPI-U). The trend from 1978-2008 is based on
the Consumer Price Index research series (CPI-U-RS).
(3) Unit nonlabor payments include profits, consumption of fixed
capital, taxes on production and imports less subsidies, net interest and
miscellaneous payments, business current transfer payments, rental income
of persons, and the current surplus of government enterprises.
(4) Current dollar output divided by the output index.
(5) Quarterly changes: Percent change compounded at annual rate is
calculated using index numbers to three decimal places. Indexes
published in the news release are rounded to one decimal place for
convenience. Annual changes: Percent change is calculated using annual
average indexes to three decimal places.
(6) Unit nonlabor costs include consumption of fixed capital, taxes on
production and imports less subsidies, net interest and miscellaneous
payments, and business current transfer payments.
(7) Total unit costs are the sum of unit labor and nonlabor costs.
(8) Unit profits include corporate profits before tax with inventory
valuation and capital consumption adjustments.